Fitch says US to keep its AAA rating
Fitch has upheld its AAA rating on the US after lawmakers approved spending cuts to avoid a debt default, but it warned the world’s largest economy must cut its debt burden to avoid a future downgrade.
The credit rating firm said that while the agreement means default risk is extremely low, the US “must also confront tough choices on tax and spending against a weak economic backdrop if the budget deficit and government debt is to be cut to safer levels over the medium term.”
David Riley, Fitch Rating’s primary analyst for the US, told Reuters the firm would not rule out slapping a negative outlook on the rating when it concludes its review later this month.
Riley said the ongoing review will take into account the “positive” outcome of a debt agreement achieved by lawmakers on Tuesday and prospects for the US economy, which have disappointed Fitch.
“The downward revisions of the GDP were bigger than we expected and a source of concern,” Riley said. “There could be a rating action which could include a revision of the outlook. I certainly couldn’t rule that out.”
Fitch considered the debt agreement a “step in the right direction” that shows Washington has “the political will and capacity to ultimately do the right thing.”
But such a vote of confidence from Fitch did not dispel fears ratings agency Standard & Poor’s will cut the nation’s top-notch rating.